A vendor tends to a customer at a public market in Quezon City, Metro Manila, Philippines, October 4, 2024. REUTERS/Eloisa Lopez

By Mikhail Flores and Karen Lema

MANILA (Reuters) -Philippine inflation stayed below the central bank's target for the eighth straight month in October, giving it leeway to lower interest rates again next month to support economic growth.

Annual inflation held steady at 1.7% in October, as slower increases in the cost of food and transport offset the rise in utility, clothing and footwear prices, the statistics agency said on Wednesday.

Inflation in October, which was unchanged from the previous month, was below the 1.8% median forecast in a Reuters poll and less than the central bank's 2.0% to 4.0% target band.

Goldman Sachs Research said in a note October's inflation reading could allow for more monetary easing in December.

"We continue to expect the (Bangko Sentral ng Pilipinas) to cut policy rates by another 25 bp in the December 2025 meeting -- taking the terminal rate to 4.50%."

Manageable inflation allowed the BSP to cut its key policy rate for the fourth straight time in October.

Last month, Governor Eli Remolona said another rate cut was possible at the BSP's final policy meeting in December and did not rule out further easing next year, backtracking on earlier guidance that the current cycle was nearing its end.

Excluding volatile food and energy costs, core inflation eased to 2.5% in October from the prior month's 2.6%.

Contributing to easing food inflation was the 17% annual decline in rice prices, compared with the prior month's 16.9%.

The Philippines has extended a ban on rice imports that took effect on September 1 until the end of the year to shield farmers from the impact of cheaper imported rice.

The central bank said in a statement after the data that risks to the inflation outlook were limited as price pressures were expected to ease amid stabilising global commodity prices.

However, it said the outlook for domestic economic growth had weakened. "This outlook reflects in part the impact on business confidence of governance concerns about public infrastructure spending," it said.

"Going forward, the Monetary Board will continue to review newly available information and reassess the impact of prior monetary actions in light of evolving economic conditions and their implications for inflation and growth," the central bank said.

Third quarter GDP data will be announced on Friday, and economists in a Reuters poll expect the economy to have expanded 5.2% from last year, weaker than the previous quarter's 5.5%.

(Reporting by Mikhail Flores and Karen Lema; Editing by David Stanway and Jacqueline Wong)